"Miracle Max" and the Marveling Media

In the days following his purchase of the Daily News in March 1992, British press baron Robert Maxwell heard something new on the streets of New York. It was the sound of people clapping and whistling and cheering -- for him. Celebrities flocked to his yacht. Hostesses vied for his presence. Even his rivals in the most competitive newspaper market in the country seemed to welcome Maxwell's ebullient entry into the arena. "In my whole life in London," he said, "no one's ever acted like this."

The cheering stopped abruptly on November 5. From the moment his body hit the water off Grand Canary Island, Maxwell became the subject of feverish revision in both the American and British media. The change was most pronounced at Maxwell's own London Daily Mirror, where evidence that the proprietor couldn't actually walk on water prompted a series of revelations about the financial, sexual, and personal failings of a man who had previously been described in its pages solely in reverential terms.

In the U.S., the transition from "Miracle Max" to "Mad Max" was just as swift. Within days, "the man who single-handedly saved the Daily News" (New York Post, November 6, 1991), became the man who stole his employees' pensions; by the end of November, the flamboyant billionaire became, in columnist Jimmy Breslin's pungent phrase, just another "busted valise."

We know now that Maxwell was a con artist, that his rescue of the Daily News was just another joker in an intricate house of cards. We also know (of it wasn't already obvious) that hard-bitten reporters are no harder to fool than cool-eyed bankers. What we don't know is how this particular story got away. There are a few honorable exceptions, but your correspondent wasn't among them.

By the beginning of 1991 I had been off the media beat for more than a year. Still, when my editor at New York Newsday asked what I thought of the various News suitors, I didn't hesitate: "Maxwell's the one to watch. He's the only candidate with both the ego and the wallet." Oh, well. At least I didn't lend Maxwell any money.

What the journalists who covered the Daily News sale did lend Maxwell was credibility. Which, as it turns out, was something he desperately needed. By the time he bought the Daily News, Maxwell's British empire was already beginning to unravel. Tom Bower's scathing biography, Maxwell, The Outsider, had reached the top of British best-seller lists, despite a blizzard of libel suits against Bower, his publisher, and stores that carried the book. London analysts who followed Maxwell's stocks were warning off their better customers, and between the lines the British press was already accusing Maxwell of rigging his share price.

Meanwhile, back in New York, Maxwell was receiving the kind of media adulation previously reserved for the wisdom of Donald Trump (until his fall) or the strivings of Michael Milken (ditto). Unlike Milken or Trump, though, Maxwell became good copy precisely by maneuvering his considerable bulk into the media's own back yard. That Maxwell was a newspaper publisher makes his success at gulling so many reporters -- and editors -- all the more interesting.

How did he do it? Knowing how to make an entrance helped. "Not that many people sail up the East River on a 180-foot yacht," says Sydney Gruson, the former New York Times vice-chairman, now at Rothschild Inc., who was Maxwell's investment banker for the News deal.

The parachialism of the New York media was also a plus. "We looked at it mostly from the point of what is it going to mean for the Daily News," says Scott Ladd, a reporter for New York Newsday. Moreover, he says, "when Maxwell bought the Daily News, the Tribune Company gave him $ 60 million to take it. He wasn't paying for anything."

For the local papers, there was an added complication. "Are you going to go after the owner of another New York newspaper? It looks mean-spirited," says New York Times reporter Steve Lohr. Perhaps because there were more direct competitors of Maxwell's new acquisition, both the New York Post and Newsday were tougher, with the Post emphasizing Maxwell's "ruthless" behavior (including "underpaying writers"), and Newsday quoting British analysts warning that his companies "often shuffle assets among themselves."

All the New York dailies were hamstrung by a lack of sources. "You would have needed somebody on the inside to open it up for you," explains Lohr. "Everybody was scared to death of this guy," says Wall Street Journal reporter Meg Cox, adding, "It's hard to attack him with facts because the information was so tightly held, and without any information it was hard to sustain an interrogative conversation."

Lohr, whose profile of "Britain's Maverick Mogul" in the May 1, 1988, issue of The New York Times Magazine was one of the earliest full-length portraits of Maxwell in the U.S. press, recalls that "at the time, there was othing to lead me to believe he was not on the level." Even Maxwell's bankers, says Lohr, "didn't know until the end, right?"

"His finances were locked behind an incredible web of interlocking companies and trusts," says banker Gruson. "Nobody had any idea of what was uncovered later. I don't think there was any way reasonable people could have known it over here. The superficial appearance of everything was so good, there was no reason to doubt," he says, endorsing the widely held and comforting theory that Maxwell was just too slippery a character for anyone to catch.

The only problem with this theory is that it is demonstrably false. yes, there were genuine obstacles in the way of any reporter who tried to probe behind Maxwell's many facades. Maxwell was notorious for responding to criticism with writs for libel. His tangle of holding companies and Liechtenstein-based foundations defied instant analysis -- as it was designed to. Finally, disgruntled former employees were afraid to talk to the press, since under British law reporters whose coverage of private companies is partially based on leaks can be compelled to reveal their sources, who can then be sued.

But none of these factors explains away an embarrassing fact: some people got the story right. And if you ask these reporters what could the rest of us have known and when could we have known it, the answers aren't flattering.

Alan Freidman covered the Daily News sale for the Financial Times, the most consistently skeptical of the British dailies. "I was struck at the time by the absolutely uncritical tone of the American coverage," he says. "I recall being asked, 'What do you know? What's the dirt?' and I recall replying, 'Be very careful with this man. He was declared unfit to run a public company. Don't swallow everything he says.' The American media failed to do their homework on Maxwell."

Friedman, who is himself American, says that simple laziness was to blame. "I recall being asked by the correspondent for a major New York paper, 'Can you give us the stuff?' and I replied, 'You can start by doing a Nexis search of the last twenty years.'"

Stories about how Maxwell tried to suppress Bower's book offered one set of leads, says Friedman, and a careful reading of the FT's irreverent Lex column would have raised questions about both Maxwell's habit of selling parts of his empire to himself and the nature of his Liechtenstein holdings. Most important, says Friedman, anyone who read the 1971 British Department of Trade and Industry report on Maxwell's attempt to sell his Pergamon publishing company to financier Saul Steinberg would have seen Maxwell described as someone who couldn't be trusted "to exercise proper stewardship of a publicly quoted company."

Though nearly every extended look at Maxwell mentioned the DTI verdict, most U.S. reporters dismissed it as "ancient history" or argued, in the words of a March 25, 1991, Time magazine profile, that since Maxwell continued to make money, "The rebuff hardly stopped him." A number of reporters fell for Maxwell's (false) assertion that he had been vindicated on appeal. In fact, Maxwell's appeals had been dismissed, and in New York, where Steinberg sued for fraud, Maxwell and his bankers agreed to pay $ 625 million to settle the suit.

"With full knowledge of hindsight, I would say that the DTI report was the key to understanding what Maxwell was about," says Christopher Silvester, a staff writer for the British satirical weekly Private Eye who wrote a profile of Maxwell for Spy magazine in May of 1988. Like many of the "tougher" American looks at Maxwell, Silvester's Spy piece focused on the publisher's manifold personality defects rather than on his financial chicanery. (In August, though, more than three months before Maxwell went over the side, Spy published a trenchant article with the prescient headline Daily News Workers: Check Your Pension Statements Now.")

Private Eye's shoot-from-the-hip reputation (and the fact that it lost one costly libel suit to Maxwell) may have made American reporters reluctant to take it seriously. But as a source of both checkable leads and suggestive tidbits about Maxwell's dealings, it had few peers. And Silvester, along with a few Maxwell-watchers at the FT, The Independent, the Daily Mail, and the London Sunday Times, had been on to Maxwell's tricks for some time. "Throughout the sixties, seventies, and eighties, what he did was mislead shareholders of public companies about the assets of those companies," says Silvester. "He was using the international nature of his empire to gamble with shareholders' money," which, as Silvester points out, was exactly what Maxwell was accused of doing by the DTI.

"For a long time Maxwell was quite lucky, but really things began to go wrong when he bought Macmillan in 1988," Silvester adds. From then on, "the DTI report was a road map, and if you followed it you began to understand what all the different layers were for."

At least one U.S. publication did exactly that. In its October 24, 1988, issue Business Week ran a story about Maxwell's pursuit of American companies. London-based reporter Mark Maremont's examination revealed more about the mogul's finances than anything previously published on either side of the ocean. Last March, the magazine greeted Maxwell's New York triumph with a question: "Can Maxwell Afford His New 'Pet'?" Maremont's answer: "A Business Week investigation indicates that Maxwell's finances are parlous." Finally, on July 29, Maremont concluded "the load of debt is crushing Maxwell."

What makes Maremont's work worth pondering is that any of us willing to make the effort and smart enough to put the pieces together could have done it. Unlike the splashier Wall Street Journal lead story on Maxwell's "BLOATED EMPIRE," which came out six weeks later, his July Business Week article didn't depend on interviews with Maxwell or his former employees. Instead, Maremont relied on publicly available documents, critical statements from London analysts, and his own belief, based on the DTI report, "that Maxwell just wasn't what he said he was."

"I spent fairly long periods in Companies House, a record repository for company information here in London," Maremont recalls. "Tracing one company owned by another owned by another I started to wonder, Why did he have all these dealings between public and private companies? Why was he swapping assets back and forth between those companies?"

Maremont questioned everything. Back in 1987, for example, Maxwell bragged that he had dodged the October 19 stock market crash by moving his holdings to government bonds. Business Week printed the boast, as did Steve Lohr in his 1988 Times profile. "Now cash is king," he quoted Maxwell as saying, "and I've got the cash." Six months later Maremont pointed out that "in fact" a footnote in Maxwell's 1987 annual report listed $ 562 million in stocks, which had lost 15 percent of their original value. He also noted that Maxwell avoided showing the loss in his yearly bottom line by juggling his stock portfolio from the conventional "current assets" heading, where they had always been listed in the past, to the "fixed assets" category normally limited to plant and equipment.

Helpful on the fine points, Maremont's reporting really paid off on the broader outlines of the story. "It took a great deal of time and energy to go through all these records because they were on microfiche," he says. "But a lot of it was there. All the shares I was able to discover were pledged to banks. You could see the pattern. Shares would come in and they would be immediately borrowed against."

Leveraged up to his eyeballs, Maxwell needed to keep the price of all those shares high in order to stay afloat, since if share prices fell, the banks would demand more collateral. But, as Maremont reported last March, most of Maxwell's 1990 profits came from currency speculation or the sale of assets. And the more assets he sold, the less cash he had coming in on a regular basis. In the end, Maxwell's only hope of avoiding bankruptcy was a series of winning currency speculations. It now appears that Maxwell, likes a craps player who pawns his wife's jewelry, looted his employees' pensions funds in a desperate bid to stay in the game.

The Journal's September 13 page-one story was also the result of plain old-fashioned hard work. "I talked to Susan Heilbron, Maxwell's former general counsel, for ten months," says reporter Patric Reilly. "It took that long to get her to say, on the record, that Maxwell never gave her a flow chart."

Reilly began gathering string on Maxwell in early 1990 -- shortly after his arrival at the Journal. Eventually, he and his colleagues Meg Cox and Richard Hudson produced an article that, in terms of impact, was probably the most important story about Maxwell published in the U.S. press. Their conclusion was similar to Maremont's: Maxwell's debts "are likely to force him to slough off at weak prices properties that cost him a fortune just a few years ago." With Maxwell still trying to interest American investors, that verdict on the Journal's front page meant more than the same news on page 32 of Business Week. But by using an approach that depended on access to sources -- to what Cox called "a critical mass of pissed-off people" -- the Journal was unable to get its findings into print until long after Maxwell bought the News.

According to Paul Davies, a British libel specialist whose clients include the Financial Times, if Maxwell had been an American, he would almost certainly have been investigated more vigorously, given this country's more permissive libel laws. Under British law, a reporter must be able to prove, in court, that his story was true.

The FT's Friedman points out, though, that while differences in law and nationality may have hindered the media in unraveling the Maxwell mystery, the real fault lay with the press's willingness to "pander to the largest tycoons." Tom Bower agrees: "All your American reporters phoned me to get copies of the book. And they all swallowed Maxwell's tale just the same."

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